Northwest Fla. may be feeling effects of potential military spending cuts

C-130 airmen stand on the flight line at Duke Field in this file photo.

Daily News file photo

By LAUREN SAGE REINLIE / Daily News

Published: Tuesday, February 19, 2013 at 08:32 PM.

As the threat of severe cuts to military spending looms in Congress, uncertainty about the future already may be taking a toll on Northwest Florida’s economy.

If Congress doesn’t deter it, the law known as sequestration will take effect March 1 and trigger about $500 billion in automatic, across-the-board cuts to defense spending over the next decade.

Northwest Florida’s military-dependent economy would take a hit, economists say. In fact, they say questions over if and how the cuts will be implemented already have put a damper on local spending.

“This has affected our economy, there’s no question about it,” said David Goetsch, a local economist who serves on the state’s Defense Support Task Force, which is lobbying to prevent the cuts.

Jim Breitenfeld, who heads the defense support initiative for Okaloosa County’s Economic Development Council, described the effects as “the cost of uncertainty.”

Congress passed sequestration in 2011. It called for nearly $1 trillion in automatic and indiscriminate spending cuts unless Congress and the White House could come up with a long-term agreement on how to reduce the federal deficit. At the end of last year, Congress delayed implementing the cuts until March 1.

With that deadline at hand, some have said it looks likely sequestration will go through, although a compromise deal could still be struck. The details of what Congress will do probably will not be hammered out until the eleventh hour.

Even so, some local military families and defense contractors already have started tightening their belts, putting fewer dollars back into the local economy.

Goetsch said military personnel have clamped down on spending as they look to an uncertain future.

“The uncertainty that they face has got them holding on to every dime that they can keep,” he said.

The Department of Defense has started outlining potential impacts of the cuts, which include forced unpaid leave for civilian personnel and reductions to major programs.

Defense contractors in the area also have reduced spending.

The companies provide services such as manufacturing aircraft parts, updating and modifying older aircraft models and fabricating metal for military projects. They are uncertain how the cuts will affect future contracts, Breitenfeld said.

“Companies that would normally be investing in the future are just on hold right now,” he said. “There’s some number of jobs on hold, some number of purchases that are on hold. You just have to put it all on hold.”

Some of the contractors fear that contracts they have invested time and money in will be canceled, Breitenfeld said.

He said the cuts would have a greater impact on smaller, local businesses than larger companies that can shift priorities to other projects.

“The bigger contractors will be able to cope with it better than the small ones,” he said. “The more localized contractors, they really just have to hold their breath and try to avoid doing something that’s going to hurt them in the long run.”

An Air Force civilian hiring freeze put in place last month also has cut some jobs, as people who are retiring from Eglin Air Force Base and Hurlburt Field are not being replaced.

It will continue to reduce the local workforce until it is lifted, Goetsch said.

President Barack Obama warned Tuesday against allowing sequestration to go through, stating that it would trigger $85 billion in cuts across all government programs within the next seven months. He said the consequences would be felt throughout the economy.

It’s a guessing game as to what the final outcome will be, but Goetsch said he feels positive a compromise will be reached that will reduce the severity of the cuts.

He said Obama promised not to allow sequestration during his campaign last year and thinks it will be too politically unpalatable for him to allow it to take effect.

Obama has suggested offsetting the immediate across-the-board cuts with a combination of targeted budget cuts and increased tax revenues.

Republicans have balked at that plan, and over the weekend said sequestration likely will go through.

U.S. Rep. Jeff Miller said in a written statement that the House already has passed two measures that would replace sequestration with more “sensible” cuts, but that Senate Democrats have refused to consider either bill.

He said there still is time to avert sequestration, “but with each passing day, the likelihood of automatic cuts becomes closer to a reality.”

“It’s time for the president to quit playing games with tax increases and get serious about finding real cuts that move us towards a balanced budget, without hamstringing our military and their job of defending our shores,” said Miller, R-Chumuckla.

As the threat of severe cuts to military spending looms in Congress, uncertainty about the future already may be taking a toll on Northwest Florida’s economy.

If Congress doesn’t deter it, the law known as sequestration will take effect March 1 and trigger about $500 billion in automatic, across-the-board cuts to defense spending over the next decade.

Northwest Florida’s military-dependent economy would take a hit, economists say. In fact, they say questions over if and how the cuts will be implemented already have put a damper on local spending.

“This has affected our economy, there’s no question about it,” said David Goetsch, a local economist who serves on the state’s Defense Support Task Force, which is lobbying to prevent the cuts.

Jim Breitenfeld, who heads the defense support initiative for Okaloosa County’s Economic Development Council, described the effects as “the cost of uncertainty.”

Congress passed sequestration in 2011. It called for nearly $1 trillion in automatic and indiscriminate spending cuts unless Congress and the White House could come up with a long-term agreement on how to reduce the federal deficit. At the end of last year, Congress delayed implementing the cuts until March 1.

With that deadline at hand, some have said it looks likely sequestration will go through, although a compromise deal could still be struck. The details of what Congress will do probably will not be hammered out until the eleventh hour.

Even so, some local military families and defense contractors already have started tightening their belts, putting fewer dollars back into the local economy.

Goetsch said military personnel have clamped down on spending as they look to an uncertain future.

“The uncertainty that they face has got them holding on to every dime that they can keep,” he said.

The Department of Defense has started outlining potential impacts of the cuts, which include forced unpaid leave for civilian personnel and reductions to major programs.

Defense contractors in the area also have reduced spending.

The companies provide services such as manufacturing aircraft parts, updating and modifying older aircraft models and fabricating metal for military projects. They are uncertain how the cuts will affect future contracts, Breitenfeld said.

“Companies that would normally be investing in the future are just on hold right now,” he said. “There’s some number of jobs on hold, some number of purchases that are on hold. You just have to put it all on hold.”

Some of the contractors fear that contracts they have invested time and money in will be canceled, Breitenfeld said.

He said the cuts would have a greater impact on smaller, local businesses than larger companies that can shift priorities to other projects.

“The bigger contractors will be able to cope with it better than the small ones,” he said. “The more localized contractors, they really just have to hold their breath and try to avoid doing something that’s going to hurt them in the long run.”

An Air Force civilian hiring freeze put in place last month also has cut some jobs, as people who are retiring from Eglin Air Force Base and Hurlburt Field are not being replaced.

It will continue to reduce the local workforce until it is lifted, Goetsch said.

President Barack Obama warned Tuesday against allowing sequestration to go through, stating that it would trigger $85 billion in cuts across all government programs within the next seven months. He said the consequences would be felt throughout the economy.

It’s a guessing game as to what the final outcome will be, but Goetsch said he feels positive a compromise will be reached that will reduce the severity of the cuts.

He said Obama promised not to allow sequestration during his campaign last year and thinks it will be too politically unpalatable for him to allow it to take effect.

Obama has suggested offsetting the immediate across-the-board cuts with a combination of targeted budget cuts and increased tax revenues.

Republicans have balked at that plan, and over the weekend said sequestration likely will go through.

U.S. Rep. Jeff Miller said in a written statement that the House already has passed two measures that would replace sequestration with more “sensible” cuts, but that Senate Democrats have refused to consider either bill.

He said there still is time to avert sequestration, “but with each passing day, the likelihood of automatic cuts becomes closer to a reality.”

“It’s time for the president to quit playing games with tax increases and get serious about finding real cuts that move us towards a balanced budget, without hamstringing our military and their job of defending our shores,” said Miller, R-Chumuckla.